This Is What A Bank Run Looks Like: Home Capital Loses 70% Of Deposits In One Week
According to HCG’s latest press release this morning, the “less than prime” Canadian mortgage lender held HISA deposits of only $391 million as of Monday, May 1; this is down C$130 million from Friday, or a reduction in the total amount by 25%. It is also down 72% from the C$1.4 billion reported one week ago.
For those who need to think all the way back to the third Greek bailout of 2015 to recall what a bank run looks like, here is what the deposit situation at HCG has looked like over the past month.
There is some good news: a terminal bank run at the mortgage lender has already been largely factored in, and is largely covered courtesy of the recently announced $2 billion emergency loan from the Ontario Pension Plan – putting up to 321,000 retirees on the hook – which carries a pre-bankruptcy interest rate of as much as 20%. To this end, HCG announced today that its subsidiary, Home Trust, expects to receive the initial draw today of $1 billion from its $2 billion credit line.
However, there is another problem: the company has another C$12.8 billion in Guaranteed Investment Certificate deposits, or GICS. As these 30- and 60-day deposits come due in the coming weeks, depleting HCG’s already tapped out liquidity, and forcing even more emergency loans. Without a deposit base, Home Capital can’t fund new mortgages.
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